Acc201 module 6 exam

Piere Imports uses the perpetual system in accounting for merchandise inventory and had the following transactions during the month of October.

Oct.

2

Purchased merchandise at a $5,600 price, invoice dated October 2, terms 3/10, n/30.

10

Received a $800 credit memorandum (at full invoice price) for the return of merchandise that it purchased on October 2.

17

Purchased merchandise at a $6,000 price, invoice dated October 16, terms 2/10, n/30.

26

Paid for the merchandise purchased on October 17, less the discount.

31

Paid for the merchandise purchased on October 2. Payment was delayed because the invoice was mistakenly filed for payment today. This error caused the discount to be lost.

(a)

Prepare entries to record the above transactions assuming that Piere Imports records invoices at gross amounts.

(b)

Prepare entries to record the above transactions assuming that Piere Imports records invoices at net amounts.

Reduced processing errors.

Elimination of the need for regular audits.

Elimination of the need to bond employees.

More efficient separation of duties.

Elimination of fraud.

Firewalls, fraud, and computer viruses.

Encryption, stolen credit card numbers, and fraud.

Stolen credit card numbers, computer viruses, and impersonation.

Computer viruses, encryption, and stolen credit card numbers.

Impersonation, encryption, and firewalls.

Urges adherence to prescribed managerial policies.

Insures profitable operations.

Eliminates the need for an audit.

Requires the use of noncomputerized systems.

Is not necessary if the company uses a computerized system.

When no paper documents are required, there is increased convenience and lower cost.

These actions control the access to cash and create an independent record of all cash activities.

These procedures result in a more extensive testing of a company's records.

The Sarbanes-Oxley Act requires these steps be taken by each publicly traded company.

These procedures allow management to determine if projected cash receipts and disbursements came in over or under budgeted amounts.

Current assets.

Current liabilities.

Long-term liabilities.

Operating cycle liabilities.

Bills.

Must be certain.

Must sometimes be estimated.

Must be for a specific amount.

Must always have a definite date for payment.

Must involve an outflow of cash.

Wright Company deposits all cash receipts on the day when they are received and it makes all cash payments by check. At the close of business on May 31, 2013, its Cash account shows a $28,100 debit balance. The company’s May 31 bank statement shows $26,400 on deposit in the bank.

a.

The May 31 bank statement included a $130 debit memorandum for bank services; the company has not yet recorded the cost of these services.

b.

Outstanding checks as of May 31 total $5,900.

c.

May 31 cash receipts of $6,500 were placed in the bank’s night depository after banking hours and were not recorded on the May 31 bank statement.

d.

In reviewing the bank statement, a $430 check written by Smith Company was mistakenly drawn against Wright’s account.

e.

A debit memorandum for $540 refers to a $540 NSF check from a customer; the company has not yet recorded this NSF check.

Prepare a bank reconciliation for the company using the above information.

Current assets.

Current liabilities.

Earned revenues.

Operating cycle liabilities.

Bills.

A debit to Postage Expense.

A debit to Petty Cash.

A debit to Cash.

A debit to Cash Short and Over.

A debit to Supplies.

Hitzu Co. sold a copier costing $6,500 with a two-year parts warranty to a customer on August 16, 2013, for $13,000 cash. Hitzu uses the perpetual inventory system. On November 22, 2014, the copier requires on-site repairs that are completed the same day. The repairs cost $146 for materials taken from the Repair Parts Inventory. These are the only repairs required in 2014 for this copier. Based on experience, Hitzu expects to incur warranty costs equal to 3% of dollar sales. It records warranty expense with an adjusting entry at the end of each year.

1.

How much warranty expense does the company report in 2013 for this copier?

2.

How much is the estimated warranty liability for this copier as of December 31, 2013?

3.

How much warranty expense does the company report in 2014 for this copier?

4.

How much is the estimated warranty liability for this copier as of December 31, 2014?

5(a)

Prepare journal entries to record the copier’s sale.